All too often I’ll meet someone new and once they learn what I do they’ll try to sell me on a “home based business” they’re involved with. I always decline and let them know I’m not interested in “making extra money on the side” as all my time and focus is spent on building my own consulting business.
After attempting (unsuccessfully) to convenience me that their company is a “real business”, they’ll usually inquire about hiring me to help them market their MLM (since they aren’t actually making any money with it). My answer is always the same: I don’t work with multi-level or network marketing companies.
Like them, you’re probably wondering why.
A Real Business?
Business and entrepreneurship is about creating value by finding a need and filling it, either through creating a product or providing a service. Network marketers do neither. They are non-salaried, under-paid salesmen. They’re not creating a product, service, or providing any additional value to the market. In fact, I would argue they artificially inflate the market price by acting as an un-needed middle man.
What happens when you have a middle man involved? You guessed it. The price goes up.
These independent agents or “distributors” are compensated for selling products directly to consumers by means of relationship referrals and word of mouth sharing so the company doesn’t have to spend money on marketing or advertising. But in reality, every MLM company I’ve ever seen has always placed more focus on recruiting new distributors to “join their team” than on selling their product.
However, without a product being sold, there is no business, just a pyramid scheme.
What I find even crazier about this model is that the companies require their agents to purchase a distributorship before they can begin recruiting others selling their products! Imagine if you went in for a job interview and the interviewer told you that you can have the job, but first, you have to pay the company a fee before you can begin work. You’d walk out the door wondering what kind of scam they were running, right?
Purchasing a distributorship so that the company will now “allow” you to sell their products for them is beyond ridiculous. It’s a great deal for the company, but not so good for those who are paying them for the “privilege” of recruiting other distributors and (hopefully) selling their product(s).
Even though MLMs try to claim that franchises employ the same strategy, the fact is that upon purchase of a license to open a franchise store, the new business owner gains access to a franchisee’s already proven business model and branding for a prescribed period of time in order to sell the product or service. The failure rate of new franchises is much less than that of network marketing distributorships.
Also, multi-level marketing companies don’t have a proven model for sales or branding, since their entire business is concerned with recruiting others who will then (supposedly) consume the products and sell to their family & friends, whereas normal supply chain and distribution methods used by traditional businesses are not attempted by them.
(For what it’s worth, I also don’t work with franchisees, primarily because the parent company limits their ability to market effectively using my strategies.)
A Hard Truth
The MLM companies that employ this type of distribution model are selling a false hope to naive individuals that anyone can become a successful entrepreneur or business owner and get rich quick. But this is simply not true and is factually incorrect.
Starting and running a business is hard. Sacrifices have to be made. Lots of time and money are usually required. Lack of sleep is a standard pre-requisite. I know from personal experience. I also know that most people simply don’t have the balls for it.
The majority of individuals who do well in MLM’s are the same ones who are successful in other (real) businesses. The same skill set applies to both markets: solid people skills, strong sales ability, having a thick skin, ability to face rejection, etc.
The potential numbers and power of duplication network marketing companies use as demonstration of what can be accomplished in the industry has NEVER been met by any MLM company, specifically for the reasons mentioned above. The most recent statistic I read on the industry is that over 65% of every multi-level marketing distributor never signs up a single distributor or sells any product.
Most people won’t do the right things, long enough, consistently to become successful, whether as a network marketing salesman, a small business owner, or as an entrepreneur.
My Decision to Avoid MLMs
I decided a long time ago to only work with the best: those clients who are insanely passionate about their product or service and who are committed to creating true and lasting value for others. Since the MLM industry doesn’t meet these criteria for me, and most involved are simply looking for a way to get rich quick, I refuse to work with them.
The majority of multi-level marketing companies price their products higher than other comparable brands, and the product quality is questionable. Probably because of their pyramid payout structure I’d guess.
In my opinion, a better way for these companies to structure their sales platform would be through an affiliate model in which they partner with affiliates/distributors who then promote the product and thus earn a commission upon purchase.
Instead of encouraging distributors to recruit and signup others like themselves, this would incentivize them to actually sell the product to an end consumer (instead of recruiting), which is what the goal is supposed to be, right?
A Better Way
Money should never be the sole reason to start a business. Just because you can doesn’t mean you should. There needs to be a bigger reason.
My advice for those looking to start a business is to look at what you’re really good at and/or what you’re super passionate about (the two aren’t always aligned). Start a blog or website about that topic. Start creating prototypes for a better widget. Become the expert in your field. Do the work that it takes to grow. It won’t be easy, but it will be worthwhile. And you’ll be creating REAL lasting value. And that’s something I can get behind!